What Is An Escrow? How Does It Work?

When conducting important transactions that involve numerous intricacies, it is essential that safeguarding measures are in place to protect the interests of both parties. One efficient and common approach is none other than utilising an escrow account.

What exactly is an escrow account?

Now what exactly does escrow imply, and how does an escrow account work? Escrow refers to the use of a third party entity that is not directly involved in the transaction or contract, to safe keep documents, funds and the likes before the transaction is finalised. Terms and conditions are drafted by immediate parties (e.g. mortgagor and mortgagee) before the escrow account is created. If the agreements fall through, funds will be returned to the original owner.

Funding Societies understands the importance of building trust with investors and borrowers, and became the first peer-to-peer (P2P) lending platform in Singapore to use an escrow. We engage Vista Trust Singapore, which is regulated by the Monetary Authority of Singapore (MAS). This ensures that our borrowers and investors go through the Know-Your-Customer (KYC) process- a compliance process to verify their identity, and that all monetary transactions uphold the requisitions of the Anti-Money Laundering Act.

Why is escrow important for a P2P lending platform?

First, it ensures transparent transactions. Funds will not be transferred directly into the business account of the platform at any point in time. Rather, it goes from the investor to the escrow and finally the business as a loan, upon fulfillment of all terms and conditions. Essentially, an escrow serves as an intermediary that acts on behalf of investors or businesses to guard and transfer the funds such that neither parties have immediate access to it. Thus, all stakeholders involved in the transaction can rest assured that no underhand dealings will take place.

Second, escrow acts as a second line of safety for investors like yourself. In the event that the platform goes bankrupt, the escrow agent will continue to collect repayments for ongoing loans from the borrowers to pay the investors. In other words, investors’ money is protected by the escrow and the terms are still fulfilled.

Why should Funding Societies be your chosen P2P investment platform?

At Funding Societies, earning trust from our clients is our priority. This is the core reason why we dedicate time, effort and resources to engage an escrow agent to serve both ourselves and clients. We want to do things right, and gain the trust and support of our most valued clients.

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